AR glossary
Receivables, in plain words.
The terms finance teams use every day, with the formula and a worked example in rupees.
Terms
Accounts receivableAR
Accounts receivable is the money customers owe you for goods or services you have already delivered on credit. It is an asset on the balance sheet, but it isn’t cash until it’s collected.
Accounts receivable aging
An aging report groups unpaid invoices by how long they have been overdue, usually Current, 1–30, 31–60, 61–90 and 90+ days. It shows where your receivables are getting old.
Bad debt and write-offs
Bad debt is money owed that you no longer expect to collect. Writing it off removes it from receivables and records it as an expense.
Collection Effectiveness IndexCEI
The Collection Effectiveness Index measures how much of what you could have collected in a period you actually did collect. 100% means everything collectible came in.
Credit note
A credit note is a document that reduces what a customer owes, typically for returned goods, a post-sale discount or a billing correction.
Days Sales OutstandingDSO
Days Sales Outstanding is the average number of days a business takes to collect payment after making a sale on credit. Lower is better: cash comes in sooner.
Dunning
Dunning is the process of reminding customers to pay, usually in steps that get firmer over time: a friendly note before the due date, a reminder after it, then escalation.
Payment terms (Net 30, Net 60)
Payment terms tell a customer how long they have to pay. “Net 30” means the full amount is due 30 days after the invoice date (or delivery date, if agreed).
Promise to payPTP
A promise to pay is a debtor’s commitment to pay a specific amount by a specific date, usually made on a collection call.
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